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TDS credit denied due to cash system of accounting

I am maintaing cash system of accounting for my professional income.i have no other sources of income. My clients follow mercantile system of accounting and deduct TDS on my account accordingly but sometimes the payment is delayed which i receive it in the next financial year (other than the financial year in which tax is deducted at source.) I offer such income for tax as per cash system of accounting and accordingly TDS credit on such income is claimed in the year in which such income is received but it is not reflected in form 26AS of that asessment year. Income tax department  allows TDS credit as per form 26AS for the relevant assessment year and do not allow TDS credit for the income which is not shown in form 26AS  and accordingly they have raised demand under section 143 (1) (a) . I applied for the rectification u/s 154 stating that TDS is reflected in the form 26AS for the preceeding previous year ( in which the client deducted TDS but was claimed by me in the next year in which such income was actually received by me ) but the assessing officer has declined my application for rectification stating that my TDS credit for the relevant assessment year do not match with 26AS of that assessment year.Please advise on the course of action available to enable me to claim TDS credit in respect of income shown in the preceeding year's 26AS but offered to tax in the next year in which such income is received by me as per cash system of accounting consistently followed by me . Kindly help

Dear Mr Ajay

If it in CPC banglore all CA's face the same problem.

However there is a Delhi High court case, which states that the officer should give credit on the basis of form 16A or other proof of tax being deducted and not insist on the same appearing in 26AS.

This is being followed by local ITO.

If the amount is large , you can file an appeal and will get the relief fast

rgrs

srinivasan

Dear Ajay,

As per our understanding, now this is a separate column in the ITR Forms for the TDS claimed in the current year but deducted in the previous year. Please let us know, have you reported this TDS amount in the current year column?

You should report this TDS in the column of previous year only.

If you have any question, Pl post the same. 

Kind Regards
TaxReply.com
 

While the TDS claim detail year of tax deduction is to be mentioned and CPC/ITO's allow credit of taxes against which income has been shown in that assessment year. I am following same practice for me as well as for my clients who are following cash basis accounting and for mercantile system following clients where advances are received in different year and income is accrued in different year.

Use the following sheet provided  by the IT Department. You will never find a problem

Name of Deductor	Branch	TAN No	Un claimed TDS Deducted Fin Year	Unclaimed  TDS B/F from Pre-Year	TDS Claimed This Year	Total TDS Deposited  by deductor This-year	Amount Paid/ Credited	TDS C/F to Next Year

 

Sir this column was introduced in the form w.ef assessment year  2014-15. It was not there in the earlier return forms for periods upto assessmen year 2013-14. I have filled this column for assessment year 2014-15. The query is connection with assessment year 2012-13 and 2013-14 , the return form for these assessment years did not facilitate providing such information as tds credit for earlier years claimed in the current year 

Sir

TDS is to be claimed in the year Income is considered for taxation at the time of receipt of actual fees.

In our case we claimed the TDS in the year Fees was received . In case CPC Does not allow the TDS as claimed by you, Apply for rectification under under section 154 at the local office. Ask the AO to get your file transferred from CPC to local office and get the rectification done locally. 

Sir 

I made an application for rectification under section 154  to local tax officer but Local tax officer is not willing to consider this aspect for rectification u/s 154 stating that he cannot give me tax credit for amount  more than the amount appearing in Form 26 AS for that relevant assessment year . He is refusing to consider  form 26 AS for preceeding previous year which shows higher tax credit available but less tax credit claimed by me in the earlier year and the difference  arising there from  claimed in the next year

regards 

Ajay

This problem applies to most of us. If this is system problem, they have to grant refund from the relevant year wherein TDS details are appearing in Form 26AS. They may take an indemnity bond in favor of the tax authorities. They have to give the tax credit as claimed and supported. Delhi High Court has issued 7 mandates, those are very clear.  Please upload/file your grivence at pgportal.gov.in, tax office will be after you to take your refunds.

Good Luck!

Regards

Sangeeta

Please be kind enough to share delhi highcourt 7 mandate . I will be grateful

I am not sure how to attach it. But it should be available.

 

Thanks

SG

Even after introducing the new B/F TDS column in the ITR's, same problem is appearing again. It is mere harrassment as the A.O. is not willing to give credit of the same

Even after introducing the new B/F TDS column in the ITR's, same problem is appearing again. It is mere harrassment as the A.O. is not willing to give credit of the same

Before modification of the ITR form to allow claiming credit from TDS paid in previous FY, the following was the only method available: 

Step 1 : Claim refund of the TDS (as income will be offered for tax in next FY only)

Step 2 : Pay advance tax etc on the income in the next FY, as normal.

So is it better to continue like this even now? The only issue here is that there will be mismatch in the Credit shown by the TDS deductor in Form 26AS, and the ITR filed by the assessee, in both the  financial years. I do not think this should be a problem, but any guidance will be helpful.

 

 

 

when you are following cash basis of accounting, the TDS amounts to cash reced by you , as the other person has deducted and deposited. YOu can well take it as the income in which the same is deducted and deposited.By doig so the TDs will match with 26As, and the botheration of reconcililng and taking it in th enext year will be avoided

regards

srinivasan

Thanks for the suggestion. You are correct, the income can be included in the same FY in which the TDS was deducted, but one will then have to also pay interest for the shortfall in the entire tax payable on the income (TDS is at 10 percent, and slab being at 30 percent). If the income is shifted to the next year (sticking to cash system of accounting), such interest will not be payable.

 

 

dear Mr. Gupta

you may include Rs10 in the first year  income and d90  the year in which the amount is rece3ived.since  you follow cash basis  
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in my view, credit of TDS amount by showing the same as income and the balance on receipt will not solve the problem as department ask for reconciliation of gross receipts shown and fees as per 26AS, with the same we will not be able to convince the officer that why we have accounted TDS in this way.

In my view we must take the matter with CBDT so that they can issue appropriate directions to  officials follow the provisions of income tax act.

[2016] 67 taxmann.com 62 (Delhi - Trib.)/[2016] 157 ITD 626 (Delhi - Trib.) IT : Assessee following cash system of accounting, would be entitled to credit of entire amount of TDS being offered as income in year of deduction â– â– â–  [2016] 67 taxmann.com 62 (Delhi - Trib.) IN THE ITAT DELHI BENCH 'B' Chander Shekhar Aggarwal v. Assistant Commissioner of Income-tax, Circle 37(1), New Delhi* A.T. VARKEY, JUDICIAL MEMBER AND PRASHANT MAHARISHI, ACCOUNTANT MEMBER IT APPEAL NO. 6185/DELHI/2013 [ASSESSMENT YEAR 2011-12] JANUARY 11, 2016 Section 199, read with section 198, of the Income-tax Act, 1961 and rule 37BA of the Income-tax Rules, 1962 - Deduction of tax at source - Credit for tax deducted (Rule 37BA, scope of) - Assessment year 2011-12 - Whether clause (ii) of Rule 37BA(3) provides that where tax deducted at source has been paid to Central Government and income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in same proportion in which income is assessable to tax, i.e., this rule is only applicable where entire compensation is received in advance but same is not assessable to tax in that year but is assessable in a number of year; however, such rule has no applicability, where assessee follows cash system of accounting - Held, yes - Assessee following cash system of accounting, raised invoice on his client for services - Said client deposited TDS to credit of account of assessee and issued a certificate of TDS to assessee - Whether TDS deducted by deductor on behalf of assessee and offered as income was to be allowed as credit in year of deduction of tax deducted at source - Held, yes [Para 10 to 12] [In favour of assessee] FACTS his

No mechanism in the IT Software built yet,that the C/F TDS(and of course the Gross Amt Too) to Next year will Actually be Carried forwarded  and reflected to 26AS of Next year.If this mechanism is developed and implemented by the IT Department,then No problem with regarding March Payment showing in 26AS Under cash system of accounting .The Chartered accountants and  Financial advisors should insists upon it to the IT Department for change in software ,so that this major problem of mismatch of Gross amt and TDS both, for the month of March under cash system of accounting may be resolved,Until this step is not taken by the IT department to resolve the matter by upgrading its software,we will have to face the problem .

No mechanism in the IT Software built yet,that the C/F TDS(and of course the Gross Amt Too) to Next year will Actually be Carried forwarded  and reflected to 26AS of Next year.If this mechanism is developed and implemented by the IT Department,then No problem with regarding March Payment showing in 26AS Under cash system of accounting .The Chartered accountants and  Financial advisors should insists upon it to the IT Department for change in software ,so that this major problem of mismatch of Gross amt and TDS both, for the month of March under cash system of accounting may be resolved,Until this step is not taken by the IT department to resolve the matter by upgrading its software,we will have to face the problem .

i filed grievance with the Prime Minister in respect of the above  and the matter  was resolved in a day . The CBDT instructed the assessing officer to grant tax credit based on the TDS certificated issued in my favour . 

Ajay, how you filed grievance with Prime Minister.

Pl. inform website for the same.

 

Shirish

pgportal.gov.in is the website for grievances . 

I am facing the same issue. In the message trail there are few points being made:
1. From FY15 there is an additional column in ITR to reflect this situation
2. There is Delhi High Court Judgement on this
3. Local AO is not supportive on anything different from 26AS

Request the final advise from finance professional to confirm the path forward.

26
Apr

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